The latest tit-for-tat EU-China trade disputes could signal worse to come, and both sides have a lot to lose if things get out of hand and harm the much-needed economic growth they seek. PES asks: with so much to lose, what’s to gain?
In May this year, China and the EU have locked horns over solar panels, steel tubes and telecoms equipment, sparking fears of a trade war between two of the world’s biggest trading partners. While analysts have said the increase in tensions could simply reflect the fact that both are feeling the pressure from a sharp economic slowdown.
China grew at its slowest pace in 13 years in 2012 while the EU economy, sapped by the debt crisis and soaring unemployment, is mired in a record-long recession. “I think the fact that the EU is in a negative growth spiral cannot be divorced from their trade actions with China,” said Sergio Marchi, head of the Marchi Group management consultancy and former Canadian International Trade Minister and ambassador to the World Trade Organization.
EU political leaders “At this time of job losses and economic hardship want to demonstrate to their constituents that they are tough in the face of any challenges from China,” Marchi said.
But the danger is that they go too far.
“The EU must be careful in not overplaying its hand. China understands politics but they don’t like being put on the public spot, especially if it runs the risk of losing face publicly. If they decide to fight back, then the EU might be facing a lose-lose scenario,” Marchi added.
Zhang Hanlin, professor at the University of International Business and Economics in Beijing, said the main loser in any trade war would “certainly be the EU, EU consumers and EU industry, not China.”The EU is recovering and definitely needs the support of the global market because the EU, like China, is an economy that depends a lot on foreign demand,” Zhang said.
The stakes are enormous. EU exports to China totalled $212 billion last year, with imports $334 billion, making theirs one of the biggest trading relationships in the world.
For its part, the Chinese Government has warned the European Union against the potential negative impact of imposing import duties on solar photovoltaic panels.
The European Commission intends to tax Chinese panels with anti-dumping duties ranging from 37 to 68 per cent. According to China, the commission could open a Pandora’s Box that would derail Europe’s solar energy efforts and damage China-EU trade relations, Solarplaza, organiser of the Solar Future: NL ’13 conference, reports.
